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0.37 0.42 0.65 3.34 7. Rawe Corporation\'s accounts receivable at the end of Yea

ID: 2499282 • Letter: 0

Question

0.37

0.42

0.65

3.34

7.

Rawe Corporation's accounts receivable at the end of Year 2 was $356,000 and its accounts receivable at the end of Year 1 was $309,000. Sales, all on account, amounted to $1,440,000 in Year 2. The company's average collection period (age of receivables) for Year 2 is closest to: (Assume 365 days a year. Round intermediate calculations to 2 decimal places.)

4.3 days

90.2 days

84.3 days

78.3 days

8.

3.75

0.66

1.75

2.75

Nickolls Corporation has provided the following financial data:

Explanation / Answer

6. The current ratio is computed by dividing current assets with the current liabilities, hence the formula of computing current ratio is:

Current Assets/ Current Liabilities:

799,000 / 239,000 =

3.34

Hence option D 3.34 is correct option.

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7. The average collection period is computed by using following formula:

Number of working days/ Debtor Turnover ratio.

The debtor turnover ratio can be computed by using following formula:

Net Credit Sales/ Average Debtor

1440000 / 332500

= 4.33

So collection period shall be:

365/ 4,33

= 84.3 days so the correct option is C

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8. The company times interest earned ratio can be computed by using following formula:

Earning before interest and taxes / Interest Expense

68,739/ 25,000

=2.75

Hence option D is the correct option.